Two investment firms gunning to oust the head of ailing health club chain Bally Total Fitness were rebuffed over the weekend by an influential proxy advisory firm that recommended shareholders vote against their most crucial proposals.

Institutional Shareholder Services, or ISS, said investors should reject several proposals that effectively would allow investors to throw out Bally’s CEO Paul Toback and other top executives at the company’s annual meeting Jan. 26.

The proposals were put forward by Liberation Investment Group, which owns 11.2 percent of Bally and is run by former health club consultant Emanuel Pearlman, and Pardus Capital Management, which owns 14.7 percent of Bally and is the company’s largest shareholder.

“While we support the context of providing shareholders with rights to affect change, it is important to balance this with the need for companies to operate without constantly looking over their shoulder for daily approval from shareholders,” ISS said in its report.

Despite rejecting the proposals to oust Toback, ISS recommended shareholders vote for three board candidates supported by Pardus. Bally supports two of Pardus’ candidates but has urged shareholders to vote against former Bear Stearns investment banker Don Kornstein, who Bally says is too closely aligned with Pearlman.

John Rogers Jr., lead director of Bally’s board, applauded the ISS decision in a statement.

“Our board remains confident that Bally’s turnaround is working and that the current management team led by Paul Toback is responsible for returning the company to profitability and setting it on the right path,” he said.

Although ISS holds sway over several institutional investors – including mutual funds – its decision by no means assures the survival of Bally’s management.

Since Pardus and Liberation own more than a fourth of the outstanding shares, they could conceivably convince enough investors to yield a majority and force a change of management.

Other shareholders are also upset at how the company has been run over the past few years and are worried the board may act in their own interest when selling the company.

The Jan. 26 meeting is the first annual meeting since July 2004. The company skipped its meeting last year because of an investigation into accounting problems, which Bally blames on previous management.

In its report, ISS questioned some of the moves by Toback and other executives, including selling shares immediately after announcing the company was for sale.

The firm also said Bally’s adoption of a so-called “poison pill” was meant solely to frustrate Liberation and Pardus and not to defend against a takeover.